Asia’s largest pension plans are facing their fiercest – and potentially lengthiest – risk-off market in more than a decade, with more to lose now due to sharp increases in allocations to equities and other risk assets over that period.
The short-term bill for that growing risk appetite is likely to come due in the current quarter as one country after another shuts down chunks of its economy to contain the coronavirus that originated in China in late 2019 and quickly spread around the globe.
Among big retirement funds in the region, since 2010 equity allocations have surged to 50% from 20% for Japan's ¥169 trillion ($1.61 trillion) Government Pension Investment Fund; to 40.6% for South Korea's 736.7 trillion won ($619 billion) National Pension Service, up from 23.1%; and to 39% for Malaysia’s 924.75 billion ringgit ($221 billion) Employees Provident Fund, an increase from 27%.
Source: Pensions & Investments
Australia’s superannuation pension funds fear government moves to give people early access to their retirement savings to cushion financial hardship will compound pressures caused by the financial market rout. People in financial stress will be allowed to access up to A$10,000 ($5,765) of their pension savings by June 30, and another A$10,000 the following 12 months.
Australia’s super funds are already balancing liquidity pressuers as members shift into conservative investments like cash and bonds from so-called growth options that allocate highly to stocks. Funds have also been putting billions into unlisted assets like airports and toll roads that aren’t easily sold.
The Australian Prudential Regulation Authority (Apra) last week surveyed super funds to see if they had enough cash on hand to cover the payouts. Government treasurer Josh Frydenberg said Apra had advised the early release of super amounts of up to A$20,000 per person would not have a significant impact on the industry overall.
The A$48 billion ($27.67 billion) superannuation fund Hostplus has hired VicSuper's chief investment officer as a co-deputy chief investment officer, to work with Greg Clerk.
Andrew Howard led investments at the A$25 billion VicSuper, which is currently in the process of merging with First State Super and exploring another merger with WA Super. At Hostplus he will lead the fund's investment strategy team, working alongside Clerk.
Howard built VicSuper's investment team and designed and implemented its investment strategy. Prior to this, he was Mercer Investments' Asia Pacific chief investments officer, Pacific Current Group (formerly Treasury Group) chief investment officer, and Frontier Advisors' head of manager research.
Source: Financial Standard
China Pacific Insurance Group’s assets under management increased 22.7% year-on-year to Rmb2.04 trillion ($287 billion), its 2019 year-end result shows.
CPIC's net investment yield was 4.9%, the same as the year before. The share of fixed income investments stood at 80.4%, down by 2.7 percentage points from the end of 2018; that of equity investments was 15.7%, up 3.2 percentage points.
In 2020, though China’s economy faced mounting downward pressures and in particular the short-term disruptions caused by the coronavirus outbreak, its fundamentals remains solid, the insurer said.
Japan’s Government Pension Investment Fund (GPIF) will appoint a former Norinchukin Bank executive as its new president, a source with direct knowledge of the matter said.
The appointment of Masataka Miyazono as head of the $1.5 trillion fund will be announced later this week, said the source, who declined to be identified.
Miyazono will replace current president Norihiro Takahashi, whose term is due to expire at the end of March. Miyazono is head of Japan’s Pension Fund Association and previously served as deputy president at agricultural lender Norinchukin Bank.
Despite the global equities market being swept by coronavirus turmoil, Japanese insurers are maintaining financial stability versus market volatility, thanks to their robust balance sheet fundamentals, according to a commentary from AM Best.
The international insurance ratings house states that the credit fundamentals of most Japanese insurers have not seen major material changes, even with the ongoing Covid-19 virus outbreak and global stock markets declining. Domestically, many major insurers in Japan have seen share prices decrease by 30% to 40% since the year began.
Source: AM Best
The National Pension Service (NPS) takes the current financial market volatility caused by the Covid-19 outbreak as a grave threat and is operating its “emergency response team” for the first time in four years, the pension scheme said on March 22.
The recent stock market plunge is estimated to have wiped about W70 trillion ($55 billion) off the NPS’s stock portfolios both domestically and globally, almost equivalent to the W73 trillion net gains that the pension fund made from investments in 2019.
Source: Korean Investors
In other news, NPS will vote against the appointments of some board members at banks and major companies during shareholder meetings as they are not qualified for the positions.
NPS said its trust management committee has decided to object to the appointments of Woori Financial Group Chairman Sohn Tae-seung and Shinhan Financial Group chief Cho Yong-byoung as board members at the banks.
The pension service also said it will vote against the motion to give Hyongsung Group chairman Cho Hyun-joon and CEO Cho Hyun-sang board membership.
Source: Yonhap News Agency
Pension funds, insurance companies and asset managers in South Korea have suspended new investments in almost all alternative investments due to travel restrictions. They also have stopped investing in North America’s midstream assets – their preferred asset class between 2018 and 2019 – as plunging oil prices raise default risks of shale oil producers.
Korean institutional investors are now reviewing their existing investments to brace for cancellation or change the terms of the deals that have yet to be closed, according to investment industry sources.
The halt comes after Korean investors had raised overseas direct investing by 21% in 2019 from a year earlier, due mainly to increased activity by financial and insurance companies, Ministry of Economy and Finance data showed March 20. South Korea companies invested $61.85 billion overseas in 2019, including $14.77 billion in the US, up 32.4% from 2018.
The decision to defer the implementation of a new set of global accounting standards by another year has provided Korean insurers some breathing room amid lowered interest rates.
The International Accounting Standards Board (IASB) decided at a meeting in London March 17 for international financial reporting standards, known as IFRS 17, to come into force on January 1, 2023.
Source: Korea Times
The main bid for Prudential Life Insurance Company of Korea kicked off March 19, but its price is expected to fall below the previous estimation of W2 trillion ($1.6 billion), due to the worsening insurance sector outlook after the spread of Covid-19.
While most preliminary bidders, including KB Financial Group, Hahn & Company and IMM Private Equity, took part in Thursday's (March 19) bid, sources said. MBK Partners has yet to decide whether to bet its money on the US insurance giant's Korean unit.
Woori Financial Group, which was once mentioned as a potential bidder, decided to offer acquisition financing to IMM without directly participating in the bidding.
All contributors of Malaysia’s Employees Provident Fund below the age of 55 can withdraw a maximum of RM500 ($122.5) a month for a year from their second account, effective April 1.
“This initiative, with an estimated withdrawal of RM40 billion, is expected to benefit 12 million EPF contributors in the country,” said Prime Minister Muhyiddin Yassin. “Apart from the reduction in the contribution rate by 4% announced previously, I hope this initiative can provide additional monies for employees for them to buy daily necessities.”
The requirement will likely require EPF to retain more liquid assets or cash on its balance sheet.
Source: New Straits Times
Separately, Malaysia’s EPF is believed to have bought an office building in the city of London for £330 million ($379 million).
Morgan Stanley Real Estate Investing, together with UK real estate investment firm Greycoat, have sold Premier Place at 7 Devonshire Square to a separate account managed by CBRE Global Investors, according to an announcement. CBRE GI manages the separate account on behalf of the Employees Provident Fund of Malaysia.
Khazanah Nasional’s stakes in Bursa Malaysia-listed companies have seen their market value drop heavily since the start of the month as the coronavirus outbreak sparked heavy selloffs in the local stock market.
Bloomberg data as of March 19 showed the total market capitalisation of seven listed companies held by Khazanah fell by RM38.35 billion ($8.55 billion) to RM149.59 billion. The companies were Tenaga Nasional, Axiata Group, CIMB Group Holdings, Telekom Malaysia, Malaysia Airports Holdings, UEM Sunrise and Time dotCom.
Source: The Malaysia Reserve
The New Zealand Superannuation Fund said it will continue with its strategy of leaning into market volatility, after revealing it lost almost NZ$9 billion ($5.08 billion) since the start of the year. The sovereign wealth fund said its net asset value had dropped to NZ$37.78 billion on March 17, from NZ$46.68 billion at the end of December.
NZ Super has warned that high returns could not continue. Matt Whineray, chief executive, has said a repeat of the 2008 global financial crisis (GFC) would see its assets drop by more than half from its NZ$47 billion peak. However, the fund intends to keep buying where it sees value in the event of a downturn.
"The key with our portfolio to ensure we have the discipline, liquidity, governance and resources to hold our course through the volatility and ensure the fund is well-positioned to benefit from the eventual market recovery, as was our experience in the GFC," said Whineray in a statement.
Source: New Zealand Herald
The Philippines’ two state pension funds – Government Service Insurance System and Social Security System – bought a total of P385 million ($7.48 million) stocks on March 16, before the Philippine Stock Exchange (PSE) announced a trading suspension that began the next day.
Finance Secretary Carlos Dominguez III said that while the GSIS and the SSS both ramped up stock purchases, their exposures to PSE-traded equity securities were still lower than the mandatory limits under their respective charters.
Indian health and wellness startup Curefit has raised an estimated Rs8.32 billion ($109.2 million) in fresh funding led by Singapore state investor Temasek.
Two new investors, GableHorn Investments and Ascent Capital, also took part in the Bengaluru-headquartered company’s funding round.
Source: ET Tech
Taiwan's regulator banned short selling after global stocks plummeted on fears of the coronavirus pandemic. The ban applies to stocks listed on the Taiwan Stock Exchange and the over-the-counter Taipei Exchange that fell 3.5% or more in the previous trading day, the Financial Supervisory Commission (FSC) said in a statement on March 19.
“The measure is aimed at addressing local stock market volatility triggered by the sell-off due to the spread of the coronavirus,” Sam Chang, deputy director of the financial regulator’s securities and futures bureau, said in the statement.
Source: Asia Asset Management
The Thai Bankers’ Association, the Government Savings Bank, Thai insurance providers, and the Government Pension Fund jointly established a Corporate Bond Stabilisation Fund of around THB70 billion to THB100 billion ($2.12 billion to $3.03 billion) to invest in high-quality, newly issued bonds by corporates that can't fully rollover maturing corporate bonds.
The injection forms part of a new stimulus package by the Bank of Thailand, which also set up a special facility to provide liquidity for mutual funds through commercial banks. The bank said it will continue to provide liquidity to the government bond market through purchasing bonds, according to a statement.
Source: Bank of Thailand
INTERNATIONAL (EXCLUDING ASIA)
Nearly 80% of US institutional investors would not reduce commitments to or pull money out of specific regions because of coronavirus, despite concerns about the impact of the outbreak, finds a survey by US-based capital placement agent Eaton Partners.
Moreover, 70% of the 69 limited partners polled said interest rate cuts by the Federal Reserve are not an appropriate remedy for the Covid-19 crisis because the problem is biological, not financial, in nature.
Only 13% are “very confident” in the US government’s ability to contain and eradicate coronavirus, while 49% are “somewhat confident” and 38% are “not confident at all”, according to the survey, conducted between March 5 and 13.
Source: Eaton Partners